India must Look beyond its Atmanirbhar Bharat Policy

Newspaper Rainbow Series     30th November -0001     Save    

Context: The government’s focus on Atmanirbhar Bharat and Production-Linked Incentives (PLIs) for manufacturing may end up as just another middling policy, if not complimented with the export promotion.

Historical evidences: of import substitution (worldwide)

  • Both the UK and the US followed a policy of protecting domestic industry, building industrial capacity and absorbing technology, before opening their markets to the rest of the world.
    • Mercantilist model of the British colonial government: High import tariff to protect domestic industries while exporting finished goods to its colonies.
    • USA: High tariffs on imports generated huge surpluses for the US economy as it became the primary supplier of war material to the Franco-British alliance.
  • Asia: China, Japan and South Korea have used a version of the same policy.

Deficiencies in the Atmanirbhar strategy and export policy: centred around PLIs for a handful of products.

  • India has missed the bus: Many claim that despite being an early signatory to the WTO, severely constrained the spectrum of export-promotion measures.
  • Limited growth in domestic consumption: as most Indians are engaged in low-wage activities.
  • Over-focus on duties and exemptions: Export promotion revolves around fiddling with duties and exemptions that have a marginal impact on the creation of industrial capacity.
  • Non-unified synergy for marketing goods: Currently done by myriad export promotion councils, industry bodies and chambers of commerce without a unified vision or synergy.

Way forward:

  • Strategic approach to export promotion:
    • Identify sectors with comparative advantage and prioritize labour-intensive and high value-addition sectors that have significant scope of growth.
    • Non-financial measures: Like reduced regulatory burdens for export-oriented units, research and development centres, skill development institutes logistical support, access to technology and marketing support.
    • Financial measures: Such as accelerated depreciation benefits and credit support.
  • A Unified body to market Indian goods:
    • It should report directly to the Prime Minister’s Office and be assigned explicit and sector-specific export targets.
  • Effective collaboration between government departments and private exporters: Assign liaison officers in all departments for addressing problems faced by exporters.
  • Assigned quantitative export targets to related administrative departments and ministries.